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By the numbers: industrial research rebounds.

Industrial research and development spending in 2011 reached a level not seen since the start of the 2008 global economic crisis, according to the 2012 EU Industrial R&D Investment Score-board. The annual survey by the European Commission is a comprehensive review of firms with the 1,500 largest research and development programs. Together, they account for roughly 90 percent of the world's private R&D spending.

According to the scorecard, global R&D spending rose 7.6 percent in 2011, after rising 4.0 percent in 2010 and declining 1.9 percent in 2009. In 2011, growth was 9 percent in the United States, 8.9 percent in the European Union, and 1.7 percent in Japan. Japan's poor showing reflected stunted sales growth, due to the 2011 tsunami and flooding in Thailand, where many Japanese firms have factories, as well as to the strong yen.

While the rise in R&D investment is good news, E.U. analysts were not carried away. They warn that the economic recovery is fragile, and that positive 2011 figures do not capture the poor performance of some economies in 2012.

The analysts noted that the 2008 economic crisis dampened business innovation and R&D in all. countries, and that different countries, industries, and types of firms have recovered unevenly. For example, China and Korea fared well., as did large multinational, corporations in high-tech industries. Venture capital (outside the United States), startups, and small and medium-size enterprises were hit hardest.

The top 1,500 R&D firms are a globalized mix. One third (503) are in the United States, 405 in the European Union, and 296 in Japan. The remaining 296 are in Switzerland, South Korea, China, India, and 23 other countries.

The report looked closely at 100 companies that account for 57 percent of R&D spending by the 1,500 companies measured in the report.

Many of the top 100 participate in information technology hardware and software (34 companies), pharmaceuticals and biotechnology (22), and automobiles and parts (19).

These markets are all undergoing major shakeups. IT firms face a switch from desktop PCs to mobile devices. Drug companies must manage a large number of blockbuster medicines nearing the end of patent protection. Automakers must meet increasingly stringent government emissions and mileage standards while differentiating vehicles through the smart use of electronics. These challenges all push companies to invest more heavily in research.

Of the 100 leaders, 75 increased R&D spending--43 of them by double-digit percentages. Most of the companies with the largest R&D increases were in the information technology and communications sector. They were led by Huawei (48 percent), LG (48 percent), Google (37 percent), and Apple (36 percent).

Many automakers and parts companies also showed sharp jumps in R&D spending. They included BMW (22 percent), Delphi (22 percent), Aisin Seiki (20 percent), and Renault (19 percent).

The report also identified the most successful companies, those that more than doubled net sates between 2002 and 2011 and that invested at least 2 percent of net sales in R&D. One out of four of the 1,500 companies surveyed met those criteria. Two thirds of these high-performance companies were in high-tech industries. Two sectors showed especially strong results. Pharmaceutical and biotech had the highest sales growth, while software and computer services had the highest R&D and employment growth and the highest profitability.

The United States is a dominant player in these segments. As a result, it has a disproportionate share of high-performance companies. While the United States accounts for only 38 percent of the top 1,500 R&D firms, it is home to 59 percent of the high performers. Moreover, 33 of the top 50 performers are U.S. businesses.

GRAPH 02 TOP SPENDERS' YEAR-TO-YEAR R&D INVESTMENT
AND NET SALES GROWTH

        net sales

2003    1.8%
2004    4.8%
2005    7.0%
2006   10.0%
2007    9.0%
2008    7.0%
2009   -1.9%
2010    4.0%
2011    7.6%

GRAPH 2 R&D spending closely tracks sales growth and appears
to have bounced back to pre-recession levels by 2011.

SOURCE: 2012 EU Industrial R&D Investment Scoreboard

Note: Table made from line graph.

GRAPH 03 GEOGRAPHICAL DISTRIBUTION OF TOP R&D SPENDERS

SOURCE: 2012 EU Industrial R&D Investment Scoreboard

ENTIRE SAMPLE

EU                  30%
JAPAN               21%
REST OF THE WORLD   11%
USA                 38%

Note: Table made from pie chart.

GRAPH 3 The U.S. share of high-performance
R&B companies is high because it is home to so
many drug, biotech, software, and computer services
firms.

HIGH PERFORMERS

EU                      25%
  UK                7%
  GERMANY           5%
  FRANCE            4%
  DENMARK           3%
  THE NETHERLANDS   2%
  OTHER EU          4%
JAPAN                    2%
REST OF THE WORLD       14%
USA                     59%

Note: Table made from pie chart.
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Title Annotation:TECH BUZZ: TRENDING
Author:Brown, Alan S.
Publication:Mechanical Engineering-CIME
Article Type:Statistical data
Date:Nov 1, 2013
Words:795
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